1984 (9) TMI 126 - AT - Income Tax

Assessment Proceedings, Business Loss, Carry Forward And Set Off, Reassessment Proceedings, Set On

Summary

Issues:
1. Validity of the return filed by the assessee under section 148 of the Income-tax Act, 1961.
2. Justifiability of the ITO's decision to drop the proceedings under section 147(a) after finding no income chargeable to tax had escaped assessment.
3. Interpretation of the provisions of section 147(a) and the scope of the ITO's powers to drop proceedings.

Analysis:

Issue 1:
The appeal pertains to the assessment year 1978-79, where the assessee, a cooperative society, filed a return showing a loss of Rs. 1,08,977 under the head 'Profits and gains of business or profession' in response to a notice issued under section 148 of the Income-tax Act, 1961. The return was filed after the period allowed under section 139(4), leading to its consideration as filed under section 148 alone.

Issue 2:
The ITO, after examining the return, concluded that no income chargeable to tax had escaped assessment and decided to drop the proceedings under section 147(a). The Commissioner (Appeals) upheld this decision, citing the Mysore High Court's judgment that an assessee cannot carry forward a loss if the return was not filed within the time allowed under section 139(4). The ITO's decision was challenged by the assessee, arguing that the ITO should process the return even if only a loss was shown, relying on various judicial precedents.

Issue 3:
The Tribunal analyzed the provisions of section 147(a) and emphasized that the jurisdiction is to bring to tax income chargeable to tax, which excludes negative income like a loss. The ITO's power to drop proceedings is recognized under section 152(2) if no liability to tax is found. The Tribunal held that the ITO was justified in dropping the proceedings after determining that no income chargeable to tax had escaped assessment, thereby acting within his powers. The Tribunal dismissed the appeal, emphasizing that the ITO's decision was in line with the statutory provisions and supported by relevant judicial precedents.

In conclusion, the Tribunal upheld the ITO's decision to drop the proceedings as no income chargeable to tax had escaped assessment, rejecting the assessee's claim for determination of the loss. The Tribunal's analysis focused on the statutory provisions, the scope of the ITO's powers, and relevant judicial precedents to arrive at its decision.